AOL vs. ISPs
How do you plan to keep subscribers from jumping from AOL to
an ISP once you get these new subscribers in and they use up their free
Well, I think three things. We see ourselves not really as an ISP, but as a connected, bundled
solution for the 89 percent of the people not online. But, the new AOL has
the best features of the new IE browser. In fact, our Windows 95 client,
which will be shipping, has the integrated IE browser. You can [also] download
Netscape. So we have the biggest network, the best support, the most
content, and we've just introduced our 20/20 Plan. For most people in prime
time, which is where all our usage is, 20 hours a month of usage is unlimited,
as opposed to an ISP which is perhaps doing daytime connection. We're a
nighttime medium, we're not just a connectivity solution.
Do you plan to stay ahead of the game and ahead of the ISPs by
on proprietary software such as the AOL Net Phones?
Well, I think how you have to look at it is that these are not religious
issues for AOL. We want to be best of the breed, so today we're going to
continue to invent things that maximize the narrowband experience. There's
a myth, I believe, out there that bandwidth will be available as a footprint
over the country. We're not seeing that. The majority of people that are
getting online in their house are getting online at 14.4 kbps.
So if you design things like CNET in a wonderful HTML, Java, and Shockwave experience, millions and millions and millions of people at home can't
see them or have a pleasant experience. So our challenge is to
maximize for a narrowband, mass consumer market, and integrate the best
things in the marketplace. We have deals with Netscape and Microsoft; we
have deals with Macromedia. So we're going to reach out to the
community, and it won't be
religious. People say, "You're proprietary." I go, "Well, we're Winsock-compliant; that's open. We have both the Microsoft and the Netscape browser; that's open. We have the world's biggest high-speed network. You can come to us over TCP/IP connections. We represent about 35 percent of all Internet traffic. We are the world's largest ISP."
It seems that we're trying to make this war AOL vs.
the Internet, and we don't see it that way. Ever since the Internet
was commercialized via the Web, all we've done is grow and be successful
because we've really used the best things of the Web, but we have to
remember the sweet spot of the market is at home at lower bandwidth. And we
won't ever lose site of that. We want to be very, very targeted at the
A lot of content on AOL can also be found
on the Internet. How do you plan to keep subscribers?
Well, that's not necessarily true. The first thing is that I believe
programming is the art. What I mean by that is you can watch "Seinfeld" on
NBC and you can watch "Seinfeld" on Fox. "Seinfeld" is the number-two show on
though it has been in syndication for two years. So just right there, there's
an example of content that's found in two places. It's the programming and
it's the community. What I see today that's lonely about the Web
is that the whole Web metaphor is page-oriented and it's based on the
concept of people-to-content, where AOL's model is
people-to-content-to-people. So what we do is we program a channel that has
content that's programmed, not aggregated. So there are 200, 300, 400,000
Web sites we're going to program the best of. Two, we're going to build
community around it. Still today, with chat and message boards and IMs and Buddy Lists that let you find people online and our member directory, we
can bring that sense of community around the content, which is really good
not only for members, but for advertisers. We've sold more advertising the
last 45 days than every public Internet company, including CNET, combined.
We've sold almost $40 million in advertising in the last 30 days. The
reason for that is not only do we have the mass size, but people. Hits are
not a good metaphor. It's how many people came in and how much time they
spent. It's like going through television and saying that you went from
channel 4 to channel 7 and channel 5 got a hit because you went through. We're
more concerned with people coming in, spending time in a community of
interest, and being accounted for that way.
So I think our model is working: We've gone from $100 million to $350
million to $1 billion in sales, and we'll do $2 billion in sales this year. We
went from 1 million members to 3 million members to 6.2 million members and
we'll get to 10 million by the end of June.
Why should I join AOL as opposed to, say, Netcom or AT&T?
What if I don't like to chat and I want to spend a lot of time online?
Well, I think the industry is breaking itself along three
quadrants. The first is access. You judge an access provider by how many
POPs it has and how many sites will it serve, so that you have a local
access call as opposed to having to dial a number and then paying long
The second segment is brands. You guys have become a brand. CNET has
become a brand. You're packaging things up, you're trying to make a network.
The third is content, so let's look at those.
We have the world's biggest network. We have the most reliable
have the highest speed network, and we have the most people answering the
phones. We have 3,100 people answering customer support. Most ISPs have no
support. We have a one-disk install. You get registered, you're up. I looked at one of the telephone company's
packages the other day: It was four disks! It was their disk, it was
Netscape's disks, it was Eudora software, and it was like a personal
publishing package. Mainstream America is not going to use that. You
charge $5 a month; they won't be able to figure out how to do it.
So while we will be the largest company, there will be pockets and
segments that will find different solutions, but for the mainstream, our
network is the best one out there. You look at the programming side, we have
the most customers. Because we have the most customers, we can invest in
innovative features like Buddy Lists, chat, and virtual places.
NEXT: Pricing and Profitability